Tag Archive | "taxpayers"

All taxpayers should file on time, even if they can’t pay what they owe. This saves them from potentially paying a failure to file penalty. Taxes are due by the original due date of the return.

Here are four tips for those who can’t pay their taxes in full by the April 18 due date:

File on time and pay as much as possible. Pay online, by phone, with your mobile device using the IRS2Go app, or by check or money order. Visit IRS.gov for electronic payment options.

Get a loan or use a credit card to pay the tax. The interest and fees charged by a bank or credit card company may be less than IRS interest and penalties. For credit card options, see IRS.gov.

Use the Online Payment Agreement tool. Don’t wait for the IRS to send a bill before seeking a payment plan. The best way is to use the Online Payment Agreement tool on IRS.gov. Taxpayers can also file Form 9465, Installment Agreement Request, with their tax return. Set up a direct debit agreement. With this type of payment plan, there is no need to send a check each month.

Don’t ignore a tax bill. If so, the IRS may take collection action. Contact the IRS right away by calling the phone number on your bill to talk about options. The IRS will work with taxpayers suffering financial hardship.

Remember to file on time. Pay as much as possible by April 18, 2017, and pay the rest as soon as possible to reduce the interest and penalties. Find out more about the IRS collection process on IRS.gov.

Taxpayers: Watch Out for Scam Calls

WASHINGTON – Starting this month, the Internal Revenue Service will begin sending letters to a relatively small group of taxpayers whose overdue federal tax accounts are being assigned to one of four private-sector collection agencies.

The new program, authorized under a federal law enacted by Congress in December 2015, enables these designated contractors to collect, on the government’s behalf, unpaid tax debts. Usually, these are unpaid individual tax obligations that are not currently being worked by IRS collection employees and often were assessed by the tax agency several years ago.

Taxpayers being assigned to a private firm would have had multiple contacts from the IRS in previous years and still have an unpaid tax bill.

“The IRS is taking steps throughout this effort to ensure that the private collection firms work responsibly and respect taxpayer rights,” said IRS Commissioner John Koskinen. “The IRS also urges taxpayers to be on the lookout for scammers who might use this program as a cover to trick people. In reality, those taxpayers whose accounts are assigned as part of the private collection effort know they have a tax debt.”

The program will begin this week with a few hundred taxpayers receiving mailings and subsequent phone calls, with the program growing to thousands a week later in the spring and summer. Taxpayers with overdue taxes will always receive multiple contacts, letters and phone calls, first from the IRS, not private debt collectors.

How the New Program Works

The IRS will always notify a taxpayer before transferring their account to a private collection agency (PCA). First, the IRS will send a letter to the taxpayer and their tax representative informing them that their account is being assigned to a PCA and giving the name and contact information for the PCA. This mailing will include a copy of Publication 4518, What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency.

Only four private groups are participating in this program: CBE Group of Cedar Falls, Iowa; Conserve of Fairport, N.Y.; Performant of Livermore, Calif.; and Pioneer of Horseheads, N.Y. The taxpayer’s account will only be assigned to one of these agencies, never to all four. No other private group is authorized to represent the IRS.

Once the IRS letter is sent, the designated private firm will send its own letter to the taxpayer and their representative confirming the account transfer. To protect the taxpayer’s privacy and security, both the IRS letter and the collection firm’s letter will contain information that will help taxpayers identify the tax amount owed and assure taxpayers that future collection agency calls they may receive are legitimate.

The private collectors will be able to identify themselves as contractors of the IRS collecting taxes. Employees of these collection agencies must follow the provisions of the Fair Debt Collection Practices Act, and like IRS employees, must be courteous and must respect taxpayer rights.

The private firms are authorized to discuss payment options, including setting up payment agreements with taxpayers. But as with cases assigned to IRS employees, any tax payment must be made, either electronically or by check, to the IRS. A payment should never be sent to the private firm or anyone besides the IRS or the U.S. Treasury. Checks should only be made payable to the United States Treasury. To find out more about available payment options, visit IRS.gov/Payments.

Private firms are not authorized to take enforcement actions against taxpayers. Only IRS employees can take these actions, such as filing a notice of Federal Tax Lien or issuing a levy. To learn more about the new private debt collection program, visit the Private Debt Collection page on IRS.gov.

Watch out for Phone Scams

The IRS reminds taxpayers to be on the lookout for scammers posing as private collection firms. The IRS will be watching for these schemes as the collection program begins, and this effort will include working with partners in the tax community and law enforcement about emerging scams.

People should remember that these private collection firms will only be calling about a tax debt the person has had – and has been aware of – for years and had been contacted about previously in the past by the IRS.

“Here’s a simple rule to keep in mind. You won’t get a call from a private collection firm unless you have unpaid tax debts going back several years and you’ve already heard from the IRS multiple times,” Koskinen said. “The people included in the private collection program typically already know they have a tax issue. If you get a call from someone saying they’re from one of these groups and you’ve paid your taxes, that’s a sure sign of a scam.”

If taxpayers are unsure if they have an unpaid tax debt from a previous year – which is what the private collection firms will handle – they can go to IRS.gov and check their account balance: www.irs.gov/balancedue. If the account balance says zero, that means nothing is due, and you typically wouldn’t be getting a contact from the IRS or the private firm.

Whether or not a taxpayer’s account is assigned to a private collection agency, the IRS warns taxpayers to beware of scammers pretending to be from the IRS or an IRS contractor. Here are some things the scammers often do but the IRS and its contractors will never do:

Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes, and if a case is assigned to a PCA, both the IRS and the authorized collection agency will send the taxpayer a letter. Payment will always be to the United States Treasury.

Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.

Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.

Ask for credit or debit card numbers over the phone.

“Unexpected and threatening calls out of the blue from someone saying they’re representing the IRS to collect a tax debt is a warning sign people should watch out for,” Koskinen said.

For more information, visit the “Tax Scams and Consumer Alerts” page on IRS.gov.

Don’t Wait to Hear from the IRS or a Contractor

As always, the IRS encourages taxpayers behind on their tax obligations to come forward and either pay what they owe or set up a suitable payment plan. This means there’s no need to wait for a phone call or letter from the IRS or any of its contractors.

Frequently, taxpayers qualify for one of several payment options, and taking advantage of them is often easier than many people think. These include the following:

Most people can set up a payment agreement with the IRS online in a matter of minutes. Those who owe $50,000 or less in combined tax, penalties and interest can use the Online Payment Agreement to set up a monthly payment agreement for up to 72 months. Taxpayers can choose this option even if they have not yet received a bill or notice from the IRS. With the Online Payment Agreement, no paperwork is required, there is no need to call, write or visit the IRS and qualified taxpayers can avoid the filing of a Notice of Federal Tax Lien if one was not previously filed. Alternatively, taxpayers can request a payment agreement by filing Form 9465. This form can be downloaded from IRS.gov and mailed along with a tax return, bill or notice.

Some struggling taxpayers may qualify for an offer-in-compromise. This is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay. To help determine eligibility, use the Offer in Compromise Pre-Qualifier, a free online tool available on IRS.gov.

“If people have a problem paying their tax bill, we encourage them to reach out to us,” Koskinen said. “We have many programs designed to help people who are having trouble meeting their tax obligations. It’s better to reach out to us sooner rather than later for help, because interest and penalties on unpaid taxes can add up quickly.”

The IRS urges people not to overlook the Child and Dependent Care Tax Credit. Eligible taxpayers may be able claim it if they paid for someone to care for a child, dependent or spouse last year.

Taxpayers can use the IRS Interactive Tax Assistant tool, Am I Eligible to Claim the Child and Dependent Care Credit?, to help determine if they are eligible to claim the credit for expenses paid for the care of an individual to allow the taxpayer to work or look for work.

Eight other key points about this credit include:

1. Work-Related Expenses. The care must have been necessary so a person could work or look for work. For those who are married, the care also must have been necessary so a spouse could work or look for work. This rule does not apply if the spouse was disabled or a full-time student.

2. Qualifying Person. The care must have been for “qualifying persons.” A qualifying person can be a child under age 13. A qualifying person can also be a spouse or dependent who lived with the taxpayer for more than half the year and is physically or mentally incapable of self-care.

3. Earned Income. A taxpayer must have earned income for the year, such as wages from a job. For those who are married and file jointly, the spouse must also have earned income. Special rules apply to a spouse who is a student or disabled.

4. Credit Percentage / Expense Limits. The credit is worth between 20 and 35 percent of allowable expenses. The percentage depends on the income amount. Allowable expenses are limited to $3,000 for paid care of one qualifying person. The limit is $6,000 if the taxpayer paid for the care of two or more.

5. Dependent Care Benefits. Special rules apply for people who get dependent care benefits from their employer. Form 2441, Child and Dependent Care Expenses, has more on these rules. File the form with a tax return.

6. Qualifying Person’s SSN. The Social Security number of each qualifying person must be included to claim the credit.

7. Care Provider Information. The name, address and taxpayer identification number of the care provider must be included on the return.

8. IRS Free File. Taxpayers are encouraged to use IRS Free File to prepare and e-file their federal tax returns, including Form 2441. Free File is easy, fast and available only at IRS.gov/freefile.

Taxpayers who pay someone to come to their home and care for their dependent or spouse may be a household employer and may have to withhold and pay Social Security and Medicare tax and pay federal unemployment tax. See Publication 926, Household Employer’s Tax Guide.

Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at https://www.irs.gov/individuals/electronic-filing-pin-request.

Taxpayers who made certain energy efficient improvements to their home last year may qualify for a tax credit this year. Here are some key facts to know about home energy tax credits:

Non-Business Energy Property Credit

Part of this credit is worth 10 percent of the cost of certain qualified energy-saving items added to a taxpayer’s main home last year. Qualified improvements include adding insulation, energy-efficient exterior windows and doors, and certain roofs. Do not include the cost to install these items.

The other part of the credit is not a percentage of the cost. It includes the installation costs of certain high-efficiency heating and air-conditioning systems, high-efficiency water heaters and stoves that burn biomass fuel. The credit amount for each type of property has a different dollar limit.

This credit has a maximum lifetime limit of $500. Taxpayers may only use $200 of this limit for windows.

A taxpayer’s main home must be located in the U.S. to qualify for the credit. The non-business energy property credit is only available for existing homes.

Be sure to have the written certification from the manufacturer that their product qualifies for this tax credit. They usually post it on their website or include it with the product’s packaging. Taxpayers can use this to claim the credit. Do not attach it to a tax return. Keep it with tax records.

Taxpayers may claim the credit on their 2016 tax return if they didn’t reach the lifetime limit in past years. Under current law, Dec. 31, 2016, was the deadline for qualifying improvements to the taxpayer’s main U. S. home.

Residential energy efficient property credit

This tax credit is 30 percent of the cost of alternative energy equipment installed on or in a home. This includes the cost of installation.

There is no dollar limit on the credit for most types of property. If the credit is more than the tax owed, carry forward the unused portion of this credit to next year’s tax return.

The home must be in the U.S. It does not have to be a taxpayer’s main home, unless the alternative energy equipment is qualified fuel cell property. The residential energy efficient property credit is available for both existing homes and homes under construction.

This credit is available through 2016.

Use Form 5695, Residential Energy Credits, to claim these credits. For more information on this topic, refer to the form’s instructions. Get IRS forms anytime on IRS.gov/forms.

Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

Taxpayers who received unemployment benefits need to remember that it may be taxable. Here are five key facts about unemployment:

Unemployment is Taxable. Include all unemployment compensation as income for the year. Taxpayers should receive a Form 1099-G, Certain Government Payments, by Jan. 31. This form shows the amount received and the amount of any federal income tax withheld.

There are Different Types. Unemployment compensation includes amounts paid under federal law or state law as well as railroad, trade readjustment and airline deregulation laws. Even some forms of disability payments can count. For more information, see IRS Publication 525.

Union Benefits May be Taxable. Benefits received from regular union dues as income might be taxable. Other rules may apply if a taxpayer contributed to a special union fund and those contributions to the fund are not deductible. In this case, report only income exceeding the amount of contributions made.

Tax May be Withheld. Those who receive unemployment can choose to have federal income tax withheld by using Form W-4V, Voluntary Withholding Request. Those choosing not to have tax withheld may need to make estimated tax payments during the year.

Visit IRS.gov for Help. Taxpayers facing financial difficulties should visit the IRS.gov page: “What Ifs” for Struggling Taxpayers. This page explains the tax effect of various life events such as job loss. For those who owe federal taxes and can’t pay, the Payments tab on IRS.gov provides some options. In many cases, the IRS can take steps to help ease financial burden.

Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at https://www.irs.gov/individuals/electronic-filing-pin-request.

Exciting School District News: 2017 Refunding Bonds! The Board of Education Cedar Springs Public Schools is proud to announce the successful sale of its 2017 Refunding Bonds in the amount of $7,060,000. The Bonds are being issued for the purpose of currently refunding a portion of the School District’s outstanding 2007 Refunding Bonds and to pay the costs of issuing the Bonds. The 2017 Refunding Bonds reduce the School District interest expense over $679,873 for the taxpayers and will occur through lower debt payments over the next 12 years.

In preparing to sell the 2017 Refunding Bonds the School District, working with their financial advisor, PFM Financial Advisors LLC, requested that S&P Global Ratings, acting through Standard and Poor’s Financial Services LLC (“S&P”) evaluate the School District’s credit quality. S&P assigned the School District the outstanding underlying rating of “A+”. The rating agency cited the School District’s stable economy with good incomes, strong market value per capita, stable enrollment, strong reserves and moderate debt burden in their rational for rating of the School District at this level.

I’m extremely pleased with the results of the refunding and thrilled that we’re able to save the taxpayers of Cedar Springs almost $700,000 over the next 12 years! When you add that to the $2.5 million saved from last years’ refunding, that’s significant.

The School District’s financing was conducted by the Michigan investment banking office of the brokerage firm, Stifel, the financial advising firm, PFM Financial Advisors LLC and the law firm serving as bond counsel, Thrun Law Firm, P.C. The School District’s 2017 Refunding Bonds were sold at a true interest rate of 2.85% with a final maturity of 2029 (a repayment term of approximately 12 years). Jeffrey Zylstra, Managing Director with Stifel states, “Cedar Springs Public Schools’ Bonds were well received by the bond market. We were able to take advantage of current interest rates that met the goals of the District and resulted in a nice savings that will be passed on to the District’s Taxpayers.”

Please feel free to contact me should you have questions about this exciting news.

The Internal Revenue Service is reminding taxpayers to start thinking about who will prepare their 2016 federal tax return. The IRS began processing tax returns on Monday, January 23.

In 2016, more than 131 million individual and family tax returns were e-filed, the most accurate, safest and easiest way to file. The rest of the returns received by the IRS, numbering over 19 million, were either prepared on a computer and printed or prepared by hand then mailed.

The IRS stresses that no matter who prepares it, by signing the return, the taxpayer becomes legally responsible for the accuracy of all information included.

Free Tax Preparation

Each year, millions of tax returns are prepared for free by taxpayers using IRS Free File or by volunteers at community organization sites nationwide.

IRS Free File lets taxpayers who earned less than $64,000 prepare and e-file a return for free. Go to IRS.gov and click on the ‘Filing’ tab for options on using commercial tax software. Those who earned more than $64,000 are still eligible for Free File Fillable Forms, the electronic version of IRS paper forms. This more basic Free File option is best for people who are comfortable preparing their own tax returns.

IRS trained and certified volunteers at thousands of Volunteer Income Tax Assistance and Tax Counseling for the Elderly (VITA and TCE) sites nationwide offer free tax preparation and e-filing.

VITA offers free tax return preparation to taxpayers who earn $54,000 or less. The TCE program is mainly for people age 60 or older and focuses on tax issues unique to seniors. AARP participates in the TCE program and helps taxpayers with low to moderate incomes.

To find the closest VITA site, visit IRS.gov and search the word “VITA.” Or download the IRS2Go app on a smart phone. Site information is also available by calling the IRS at 800-906-9887.

To locate the nearest AARP Tax-Aide site, visit aarp.org, or call 888-227-7669. There are also VITA and TCE sites that provide bilingual help for taxpayers who have limited English skills.

Many taxpayers pay for tax return preparation. By law, all paid tax preparers must have a Preparer Tax Identification Number, or PTIN. Paid preparers must sign the return and include their PTIN. The IRS offers tips to help taxpayers choose a tax return preparer wisely. The Choosing a Tax Professional page has information about tax preparer credentials and qualifications. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help identify many preparers in your locality by type of credential or qualification.

The IRS urges taxpayers to avoid fly-by-night preparers who may not be available after this year’s April 18 due date or base fees on a percentage of the refund. The IRS also reminds taxpayers that a new law requires all refunds on returns that claim the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) be held until Feb. 15. This change helps the IRS detect and prevent fraud.

The Michigan Department of Treasury is cautioning taxpayers of fraudulent phone calls being made demanding taxpayers pay an immediate amount of money or face actions from the department. Calls are being received from a legitimate Grand Rapids-area Treasury phone number, which has apparently been cloned by the scammers. Victims are told they owe money to the Department of Treasury and if not paid promptly through a pre-loaded debit card or wire transfer the caller will face arrest, legal action or suspension of business.

Please be advised The Department of Treasury will not:

Demand immediate payment without first mailing you a letter

Require you to pay your taxes a certain way (for instance require you pay over the phone with a prepaid debit card)

Threaten to call the police or other law enforcement agencies to arrest you for not paying

Ask for a PIN, passwords, access codes to your bank accounts, or credit or debit card numbers over the phone.

If you receive a phone call from someone claiming to be from the Michigan Department of Treasury, but you suspect he/she is not a Treasury employee:

If you don’t owe taxes, or have no reason to think that you do, do not give out any information. Hang up immediately.

If you believe you may owe taxes or that the Department of Treasury may need to legitimately contact you, please record the employee’s names, call back number and caller ID available then call the Department of Treasury at (517) 636-5265 to determine if the caller is a Treasury employee with a legitimate need to contact you.

Please use caution and never provide personal information unless you are sure the situation is legitimate.

The Mackinac Center for Public Policy published a new analysis of Proposal 1, which voters will be asked to approve or reject on May 5. The proposal increases taxes by $2 billion and aims to dedicate most of that revenue for future road construction and maintenance. In addition to reviewing the proposed constitutional and legislative changes, this new study estimates how Proposal 1 would impact the typical Michigan household.

James Hohman, author of the study and assistant director of fiscal policy at the Mackinac Center, used data from the U.S. Census Bureau, U.S. Department of Transportation and the U.S. Bureau of Labor Statistics to estimate that Proposal 1 would increase the tax burden of the typical Michigan household by about $500 in 2016.

“These estimates rely on assumptions about the average price of gasoline and other factors, but they’re about as close as one can get to figuring out about how much taxpayers would pay if voters approve of this plan to increase funding for roads,” Hohman said.

Proposal 1 would make four changes to the Michigan Constitution: increasing the allowable sales tax rate to 7 percent, exempting fuel purchases from sales and use taxes, prohibiting public universities from receiving revenue from the School Aid Fund and earmarking a portion of use tax revenue for the School Aid Fund.

These changes are “tie-barred” with eight legislative bills that will go into effect if voters approve of Proposal 1. These laws would hike the sales and use tax to 7 percent, create a new wholesale fuel tax of 41.7 cents per gallon and earmark this revenue for roads, increase the state’s earned income tax credit, boost spending on one public school program and create new rules pertaining to road construction projects for the Michigan Department of Transportation.

Regarding the proposed wholesale tax on fuel, it is likely that prices at the pump for gasoline consumers will be higher if Proposal 1 passes. Based on data from the U.S. Energy Information Administration, the average national gasoline price in 2015 will be $2.39. At this rate, consumers would pay about 10 cents more per gallon in taxes at the pump.

“The difference between the proposed gas tax and the current one depends a lot on the price of gasoline. But only when gasoline prices exceed $4.20 per gallon will consumers start to pay less at the pump under Proposal 1,” Hohman added.

The analysis found that the proposed new wholesale fuel tax will increase at a rate that will outpace inflation. The mechanics of the formula prescribed in the law to adjust the tax rate based on inflation ensures that the rate will grow faster than inflation.

“The way the fuel tax formula is designed, taxpayers can expect to see fuel taxation rates rise faster than inflation,” Hohman said.

Even though the earned income tax credit would be increased under Proposal 1 (from 6 percent of the federal EITC amount to 20 percent), low-income households in Michigan may not experience much of a tax benefit overall.

“The average EITC recipient’s tax burden will likely be reduced slightly if Proposal 1 passes, but there will be EITC recipients whose overall tax burden will still rise,” said Hohman.

The Mackinac Center for Public Policy is a nonpartisan research and educational institute dedicated to improving the quality of life for all Michigan citizens by promoting sound solutions to state and local policy questions. The Mackinac Center assists policy makers, scholars, business people, the media and the public by providing objective analysis of Michigan issues.

A change in the personal property tax law for 2014 could give some small business owners some relief.

Effective December 31, 2013, commercial and industrial personal property with a combined true cash value of less than $80,000, is eligible for an exemption—but the exemption must be filed by February 10.

True cash value is the market value of all personal property owned by, leased by or in the possession of the owner or related entity, within a local tax-collecting unit.

To qualify for the exemption, the taxpayer must file the “eligible personal property exemption affidavit” with the local city or township. If it is not filed on time, the taxpayer will not receive the exemption. The affidavit form is available online at Michigan.gov and on the City of Cedar Springs website.

Taxpayers who qualify by filing on time, are not required to also file a personal property statement. But they still must maintain books and records relating to the description, date of purchase or acquisition, purchase or lease price, and value of all the industrial and commercial property for four years. They must make these records available to the local assessor, county equalization department, and the Department of Treasury upon request.

If the assessor believes that the property is not eligible, the assessor may deny the claim and notify the taxpayer of the reasons for the denial. A taxpayer may then appeal the denial before the Board of Review. Failure to file an exemption on time does not qualify as a denial and cannot be appealed.

Anyone who fraudulently claims an exemption for personal property would be guilty of a misdemeanor punishable by imprisonment of 30 days to 6 months and/or a fine of $500 to $2,500.

Taxpayers not eligible for the exemption must still file a personal property statement by February 20. Failure to file either a personal property statement or an exemption affidavit will result in an estimated assessment.